Thursday, July 9, 2020

Stanchart profit on a surge

The country’s oldest commercial lender Standard Chartered Bank Botswana has nearly quadrupled its profit, staging a strong comeback that will take a while until the bank fully recovers. 

This week, Stanchart reported that pre-tax profit for the financial year ended December 2019 has surged by more than 240 percent, with the bank expecting gains of about P50 million. This means 2019 profit will be close to P70 million, higher than the P20 million registered in 2018 when the bank was just emerging from one of its toughest time since operating in Botswana. 

Though the bank did not disclose yet what led to the massive increase in profit, it was already anticipated that the bank will end the year with improved earnings after delivering impressive set of results during the half year results. For the period of six months ended June 2019, Stanchart’s pre-tax profit was P33 million, up by 65 percent from 2018’s full year profit, which had kickstarted the bank’s return to profitability.

Stanchart, which has been operating in the country for 122 years has had a tough time in the last three years, falling from the list of the top three most profitable banks in the country. Trouble started in 2017 when Stanchart posted a P232 million loss, with the financial performance dragged by the closure of the BCL mines – one of the bank’s top clients.

The steep loss was in contrast to the P79.7 million profit made in 2016, which of course was also a sign of the bank’s declining bottom line performance – falling from the highs of P319.2 million made in 2014, before plunging to P47.4 million in 2015.

During the mounting losses, Stanchart’s explained that profits were falling due to constrained revenue growth, and a significant loan impairment charges and increase in costs. The subdued performance in the past three years was mainly caused by once-off impairments – a diamond and jewellery client in 2015, a mining client in 2016 and another diamond and jewellery client in 2017, said the bank. 

Besides a top down change in management, Stanchart has since reduced its exposure in certain categories of its portfolio, particularly mining, and has also tightened its risk appetite. The effects of these became evident in the bank’s half year results for the period ending June 2018, when bank declared a profit after tax of P22.7 million.

As one of the oldest members of the Botswana Stock Exchange, the once valuable stock has been dumped by investors who were rattled  by the disappointing financials, and the stock has now become a perennial loser. The share price has since fallen from the highs of P15 to the current P1.67, and though the bank has returned to profitability, the investors remain unconvinced as the stock price remains stubbornly low. 

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Sunday Standard July 5 – 11

Digital copy of Sunday Standard issue of July 5 - 11, 2020.